All of a sudden, Alaska has more than 400,000 barrels per day of new oil potential.
The North Slope, dismissed by many in recent years as a has-been conventional oil basin unable to keep up with the hip-now-with-it-and-wow shale mania of the Lower 48, is on the verge of reinvention.
In just the past year, Caelus Energy, ConocoPhillips and the Armstrong Energy-Repsol partnership have all announced oil discoveries capable of producing up to, or well in excess of, 100,000 barrels per day.
And they’re all related.
To find the link, one only needs to look back about 150 million years or so when the nearby Brooks Range began to grow, according to state petroleum geologist Paul Decker.
The billions of barrels of oil the companies believe they have found are all located in the Brookian geologic sequence: layers of sandstone carried off the then “new” mountain range by wind and water between 90 million and 105 million years ago.
“The Brookian sequence is all that matter that was shed by erosion from the Brooks Range,” Decker explained in an interview.
It’s very similar to what the Colville and Sagavanirktok and Canning rivers are doing farther to the north today.
The weight of the rising mountains — oldest to the west — pressed a trough in the Earth’s crust at their base, providing a place for the first Brookian sediments to settle, explained Mark Myers, a renowned Slope geologist, former Alaska Department of Natural Resources Commissioner and U.S. Geological Survey Director further.
That trough, or geologic foreland basin, was also filled with ocean water and river deltas when the Arctic coast was farther south than it is today, Myers added.
During those prehistoric times of higher sea levels, the Brooks Range sediments were settling to the ocean floor that is now the plain of the North Slope.
The smallest sediment particles were naturally carried the farthest, to the then base of the continental shelf, before stopping. The larger sands fell out upstream and on top of the deltas, above the shelf edge, or fore set, according to Decker.
Those first sediment layers make up the base of the Brookian sequence and the two zones targeted in the latest North Slope oil prospects: the Nanushuk and Torok formations.
“The sands in the Torok tend to accumulate at the basin of the floor, right where the fore sets kind of run out of slope angle and there’s nothing to keep propelling those sediments, so they drop out there at the basin floor,” Decker said.
The larger, Nanushuk sands came to rest above the Torok and as sea level retreated rivers carried the sediments farther and farther out to meet the ocean, eventually forming the sandstone layers found today, Decker and Myers said.
This is where the oil companies come in.
Dallas-based independent Caelus Energy came to Alaska in early 2014 with its sights set on the Torok sands.
The finer Torok sandstone has smaller gaps between its grains making it less permeable than the Nanushuk. For that reason, Caelus hydraulic fractures its North Slope wells to create pathways for the oil to travel.
Myers said the Torok at Caelus’ Smith Bay discovery is part of a large “submarine fan play,” or the edge remnants of a former river delta.
Last October, Caelus Energy CEO Jim Musselman announced his company had discovered upwards of 6 billion barrels of oil at Smith Bay, a near shore prospect in state waters on the edge of the National Petroleum Reserve-Alaska and more than 100 miles from existing North Slope oil infrastructure.
Caelus estimates full development of Smith Bay could produce up to 200,000 barrels of oil per day at its current projected size, but Musselman said he could foresee Smith Bay growing to 10 billion barrels once all of his company’s leases in the area are better examined.
“Giant fields get bigger with time,” Musselman said when the Smith Bay find was made public.
Caelus plans to drill an appraisal well next winter to get a better idea of what exactly it has.
The Nanushuk Project, now operated by Armstrong Energy, is not named that by coincidence. It is targeting the Nanushuk formation, which generally sits above the Torok.
With 16 wells drilled in the formation since 2011, the Nanushuk Project is better delineated within the Pikka Unit than Smith Bay at this point; and Armstrong CEO Bill Armstrong has told the Journal he believes it could produce up to 1.5 billion barrels of light crude at a peak rate of 120,000 barrels per day.
“The (prospect) that we just found is the first of its kind on the Slope, but mark my words, it’s going to be the new hot play,” Armstrong said in a September interview.
By January it was repeated for the first time, when ConocoPhillips made news with its Willow discovery, another Nanushuk play in the National Petroleum Reserve-Alaska to the southwest of Armstrong’s and Repsol’s work.
ConocoPhillips declined to comment further on the Willow prospect for this story, but the company’s Alaska leaders said when the discovery was announced that it contains about 300 million barrels of recoverable oil that could be pulled at a rate of up to 100,000 barrels per day.
The fact that ConocoPhillips, a typically conservative oil major, is willing to go public with a 300 million-barrel projection for Willow off of the results from just two exploration wells drilled in early 2016 could indicate the reservoir is on the scale of that found by Armstrong and Repsol, Myers surmised.
“We’re not looking at little small plays; we’re looking at very large plays,” he said. “You’ve got two of these now and there’s more running room for that (Nanushuk) play.”
Not long after, in mid-March, Repsol and Armstrong revealed very promising results from the Horseshoe well, an exploration well drilled last winter about 20 miles south of their Nanushuk Project. Armstrong said then that the Horseshoe well confirmed the oil-bearing Nanushuk reservoir they tapped into was much larger than first thought and could double the confirmed size of the original prospect. Repeatable discoveries
Decker said the Brookian plays are likely repeatable beyond those already found because the Nanushuk and Torok formations extend west to east across most of the North Slope.
The state Division of Oil and Gas has a long seismic cross-section chart of the Slope that shows numerous buried fore set breaks that formed as the ocean retreated over millions of years.
The seismic fore set marks — called “shazams” by geologists, at least according to Decker — can be a starting point for oil hunters in search of the subtle stratigraphic traps that hold oil in the Nanushuk and Torok sands.
That’s because those fore sets are a better than average place for the sandstone to peter out; and if there are shale or other impermeable rock layers above and below the sandstone formation, the oil can become trapped in the long, fading sliver of reservoir-quality rock.
“It’s the stratigraphic subtleties of how are the sands and the intervening shales distributed and do they actually completely seal at the top,” Decker said.
The fact that the North Slope coastal plain — and the edge of the continental shelf — developed in steps mostly from west to east with a slight northerly component could mean the Nanushuk oil fields will generally be long north to south and narrow east to west, he added.
That feature can be seen in the Nanushuk Project. Armstrong said the Horseshoe well delineated an oil field more than 20 miles long north to south and about 3 miles across.
Caelus also holds large tracts of mostly uninspected state leases to the east of Prudhoe Bay that company officials are excited about and also has the smaller Oooguruk and Nuna developments near Armstrong’s Pikka Unit, which holds the large Nanushuk Project.
Another positive of the Brookian formations is that they are younger and shallower than the more commonly exploited Beaufortian formations on the Slope, making them somewhat easier, and cheaper, to drill.
The Beaufortian sands that generated the giant Kuparuk field are up to about 135 million years old and can be found at depths between 6,000 and 7,000 feet, according to Decker.
And Prudhoe Bay wells often have to go to 9,000 feet before finding oil, while Nanushuk sands usually start appearing at about 4,000 feet.
Hidden in plain sight
Averse to and lighter than water, oil and natural gas always run up from their source rock, and thus require a tight seal rock layer to collect the hydrocarbons and prevent them from continuing upward.
“Where it’s not saturated with hydrocarbon, any pore space in the subsurface is saturated with water,” Decker said.
Historically, North Slope explorers — and oil drillers worldwide, for that matter — have looked for large, structural oil traps, or “bumps” in seismic data as the best places to start drilling.
These bumps in a layer of seal rock usually appear as an upside down bowl on a seismic printout and are a prime place for oil or gas to accumulate on its voyage upward.
However, the North Slope is almost as flat underground as it is above, which means the large, obvious irregularities in the rock formations that stored oil for the big fields of Prudhoe Bay and Kuparuk have mostly been exploited, Armstrong said in a previous interview.
Enter the stratigraphic trap.
“It’s traps that form because of changes in the layers horizontally. You have a sand; that sand thins out and goes away and meanwhile the shale below it and above it are still there,” Decker said.
“With a wedge of shale below and shale above that’s going to make a nice permeable sort of wedge for (oil) to build up and that’s the nature of these stratigraphic traps.”
Targeting subtle linear stratigraphic traps is not new, Decker said. It’s been done in other basins with other formations, but those holding the cash have long been scared of testing the unproven play in Alaska by employing an expensive North Slope drilling rig.
“The concept of stratigraphic traps has really been known to be a viable concept in a very general sense for 60-plus years. I had a college professor who tried to get Shell to drill one in Wyoming back in the 1950s and they’re like, ‘Nah, we’ll stick to our domes,’ and the concept was proven up by another company a few years later,” Decker recalled.
He noted several of the wells the Navy drilled in the NPR-A in the late 1940s hit Nanushuk oil and gas, but in quantities too small and in places far too remote to make development worthwhile.
Other oil basins are simply at a more mature stage of exploration, Myers and Decker concurred.
Armstrong acknowledged the Nanushuk formation he and Repsol struck was not their primary objective when they first began exploring, too.
“It was a secondary objective and it was almost invisible on the seismic, so you can see why everybody missed it,” Armstrong said.
The Nanushuk Project is tucked between the large Alpine and Kuparuk fields operated by ConocoPhillips. To that point, a top ConocoPhillips Alaska official told the Journal that “we ask our geologists every day” how they did not see what Armstrong found.
The big change really came in the form of 3D seismic mapping.
Myers and Decker almost identically likened the 3D images to “an MRI of the Earth” juxtaposed against the X-ray-like 2D seismic oil and gas explorers relied upon for decades.
“Good seismic made all the difference in being able to prospect at a lower risk for stratigraphic traps. It’s the subtlety of the traps” that necessitates the detailed data, Decker said.
Extending the play
Finally, with Caelus expanding Slope exploration to the north and west with its Torok find at Smith Bay, a couple other small companies are working to complete the Brookian chain far to the south.
Australian-based 88 Energy Ltd. and Houston independent Burgundy Xploration Inc. are currently drilling an appraisal well into the HRZ shale zone on acreage about 60 miles south of Prudhoe adjacent to the Dalton Highway.
The Icewine-2 well was spudded April 24 and hit 10,715 feet the morning of May 8, according to an 88 Energy release. The partners plan to flow test the well in late June.
If the Icewine Project is developed, it could be Alaska’s first foray into the shale fracking that has turned the petroleum industry on its head.
“We think that for a lot of the Brookian system, until we have better information, the assumption is that the HRZ shale is the most likely, most readily explainable source rock.” Decker said.
“At the same time the Brooks Range was going up, this Colville basin was going down and the first deposits out there were pretty well starved. You didn’t have sands coming in; all you had was organisms dying in the water column and raining down and clay particles raining down so that makes really good source rocks.”
Eventually, those source rocks were covered with millions of years of sediments to form what is the Slope today.
While the economics of North Slope shale production seem sketchy to many, particularly at today’s oil prices, estimates from the first Icewine well indicate nearly 1 billion barrels of oil and natural gas condensates could be there for the taking, and a resource of that size would do nothing but help the project’s economics.
If the second Icewine well is successful, the 400,000 barrels per day-plus of prospects figure will have to be revised upward soon.
Elwood Brehmer can be reached at [email protected]